The case titled ‘AB Sciex Pte Ltd. vs ACIT’ concerns an appeal against the assessment order issued by the Assistant Commissioner of Income Tax (ACIT), Circle International Taxation 1(1)(1), New Delhi, for the assessment year 2017-18. The appeal was filed to contest the finding that AB Sciex Pte Ltd. has a permanent establishment (PE) in India, leading to an alleged taxable income. The final tribunal order was pronounced on 29 April 2022.
Case Number: ITA 514/DEL/2021
Appellant: AB Sciex Pte Ltd., Singapore
Respondent: ACIT, Circle Int. Tax. 1(1)(1), New Delhi
Assessment Year: 2017-18
Case Filed On: 2021-05-13
Order Type: Final Tribunal Order
Date of Order: 2022-04-29
Pronounced On: 2022-04-29
Judges: G.S. Pannu, Hon’ble President and Saktijit Dey, Judicial Member
The captioned appeal was filed by the assessee, AB Sciex Pte Ltd., against the final assessment order dated 16.04.2021, passed under section 143(3) read with section 144C of the Income Tax Act, 1961, for the assessment year 2017-18, in pursuance of the direction of the Dispute Resolution Panel (DRP), New Delhi.
The appellant raised several grounds challenging the assessment of the total income of INR 4,46,50,443 against the Nil returned income. The primary issue was whether AB Sciex Pte Ltd. had a permanent establishment (PE) in India, as determined by the AO and DRP. Additional grounds included the erroneous attribution of profits to the alleged PE on an unrealistic and ad-hoc basis, and the improper initiation of penalty proceedings.
The assessee, a company incorporated in Singapore and a tax resident there, is engaged in the business of manufacturing and selling scientific research instruments and peripherals. For the assessment year 2017-18, the assessee filed its return of income in India, declaring nil income. The Assessing Officer (AO), after examining the details, noticed that the assessee received revenue of INR 8,96,73,757 from Annual Maintenance Contracts (AMC) but did not offer any income in India.
The AO alleged that the assessee had a Fixed Place PE and a Dependent Agent PE in India, primarily based on the agreements with DHR Holding India Pvt. Ltd. and statements from employees of M/s. Arbro Pharmaceuticals Pvt. Ltd. The AO attributed 37% of the profits earned from India to the PE and taxed it accordingly. The assessee contested this, arguing that it did not have a PE in India under the India-Singapore Double Taxation Avoidance Agreement (DTAA), and that the transactions with DHR Holding India Pvt. Ltd. were at arm’s length.
The tribunal examined the agreements between the assessee and DHR Holding India Pvt. Ltd., including the Sales Commission Agreement, Distribution Agreement, and Marketing Support Services Agreement. It noted that none of these agreements indicated that DHR Holding India Pvt. Ltd. had the authority to conclude contracts on behalf of the assessee or that it acted as a PE. The tribunal also observed that the AO relied heavily on the statements of third-party employees without providing the assessee an opportunity to cross-examine them, which was not permissible.
The tribunal emphasized that the burden of proving the existence of a PE lies with the Revenue. It found that the Revenue failed to provide sufficient evidence to establish that the assessee had a fixed place PE or a dependent agent PE in India. The tribunal also referenced relevant case law, including the Supreme Court’s decision in DIT vs. Morgan Stanley & Co., which supported the assessee’s position.
The tribunal concluded that the assessee did not have a PE in India, and therefore, its business profits could not be taxed in India. The tribunal deleted the additions made by the AO and dismissed the initiation of penalty proceedings. The appeal was allowed in favor of the assessee.
Order pronounced in the open court on 29 April 2022.
Sd/- (G.S. PANNU) PRESIDENT
Sd/- (SAKTIJIT DEY) JUDICIAL MEMBER
Delhi; Dated: 29 April 2022.
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi.
Date of dictation: 17.01.2022 & 27.04.2022
Date on which the typed draft is placed before the dictating member: 28.04.2022
Date on which the typed draft is placed before the other member: 29.04.2022
Date on which the approved draft comes to the Sr. PS/PS: 29.04.2022
Date on which the fair order is placed before the dictating member for pronouncement: 29.04.2022
Date on which the fair order comes back to the Sr. PS/PS: 29.04.2022
Date on which the final order is uploaded on the website of ITAT: 29.04.2022
Date on which the file goes to the Bench Clerk: 29.04.2022
Date on which the file goes to the Head Clerk: 29.04.2022
The date on which the file goes to the Assistant Registrar for signature on the order: 29.04.2022
Date of dispatch of the order: 29.04.2022.
AB Sciex Pte Ltd. vs ACIT – ITA 514/DEL/2021: Permanent Establishment
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